Can property be left under operational management or economic administration after 28 August 2025?
Viktoriia Kopchak, a Policy Advisor at the Regional Office of U-LEAD with Europe in Kherson Oblast, provided explanations at the info session: “During the transition period (3 years), until 28 August 2028, municipal property that has been transferred under operational management or economic administration rights may continue to be subject to this legal regime”.
The municipality of Varva, Cherkasy Oblast, sees this provision as an opportunity for gradual preparation rather than a signal for immediate decisions. “The municipality is still in the transition phase and is gradually preparing for the changes, with the understanding that there is still time to prepare before 2028,” says Valentyna Nichyk, a Chief Specialist of the Department of Socio-Economic Development, Municipal Property, Infrastructure, Planning and Accounting of Varva Settlement Council.
Krasnokutsk municipality, too, reports that the properties they transferred earlier are not being reviewed or having their legal status changed yet, and they are using the transition period to figure out what to do next.
Does everyone have to transition to usufruct, or are there exceptions?
Explaining the logic behind the changes, the U-LEAD adviser emphasised:
“Usufruct of municipal property comes into effect as a right of personal free possession and use beginning on 28 August 2025. At present, property may not be transferred under the right of operational management or economic administration”.
In the municipality of Krasnokutsk, Kharkiv Oblast, this framework is set out quite clearly. Nataliia Maliarenko, a Chief Specialist of the Accounting and Municipal Property Department of the Financial Management Division of Krasnokutsk Settlement Council of Bohodukhiv Rayon, stated:
“In the case of municipal enterprises, and following their transformation, limited liability companies or joint stock companies, there are essentially two options: either transferring the property under usufruct or contributing it to the authorised capital. The law does not provide for other solutions”.
Varva municipality also recognises the inevitability of the transition, while emphasising that municipal enterprises are still in the process of preparing for the new legal regime.
Dealing with previously transferred property: automatic transfer or a separate decision by the council?
At the info session, Ms Kopchak noted that this is not an automatic process:
“Once the transition period is over, the property that was assigned under the right of operational management or economic administration will be subject to the law on usufruct of municipal property, which is considered to be established for an indefinite period. The right of usufruct arises for the party concerned from the date of receipt of the decision of the local self-government body on the establishment of the right of usufruct of municipal property, unless otherwise provided by law.
Is it possible to terminate operational management or economic administration early?
Legislative provisions for this are in place, as confirmed by Ms Kopchak during the information session:
“The rights of economic administration and operational management of municipal property may be terminated before the end of the transition period in accordance with the procedure established by law”.
According to Krasnokutsk officials, the key challenge here is more organisational in nature:
“It is important to avoid situations where too many decisions are made at once. At the same time, the mechanism for terminating rights itself does not appear to be overly complex”.
Varva municipality does not anticipate a mass early termination of existing rights and expects that most entities will take advantage of the full transition period.
What is the correct decision for the council: to terminate the right or to transfer it under usufruct?
Viktoriia Kopchak stressed the role of the property owner:
“The legal status of municipal property is determined by the local self-government body”. If, during the transition period, it becomes necessary to transfer property that is already under operational management or economic administration to another entity in the public sector — for example, an institution or agency — the local self-government body shall decide to terminate the right of operational management and transfer it to another entity under the right of usufruct”.
In Varva municipality, this position is articulated as follows:
“Both the decision to terminate the right of operational management and the decision to transfer property under usufruct are lawful if they are aimed at the effective use of municipal property and are adopted expressly for this purpose”.
Thus, when applying the new legal regime of usufruct of municipal property, municipalities should use a specific procedure for transferring property under usufruct, detail it in their own regulations and make this procedure as open and clear as possible for all participants.
